© Reuters.

By Yasin Ebrahim

Investing.com – The dollar fell sharply against its rivals Monday as analysts declared the recovery in the greenback over, but stopped short of ruling out a “second wave” of strength on worries the Federal Reserve could raise rates sooner than expected.

The , which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.50% to 91.08.

“The short-term recovery of the dollar is over for now … [but] we cannot rule out the possibility of a ‘second wave’ of USD recovery,” Commerzbank (DE:) said.

The bank suggested there was a risk the Federal Reserve could tighten monetary policy sooner-than-expected that would justify an “expensive” dollar. “The Fed could once again (as it did in 2015 to 2019) pursue a monetary policy in the medium term that is so qualitatively different from that of the ECB that an “expensive” dollar would be justified.

In the event of a second coming of dollar strength, the move will be short-lived as inflation is unlikely to trend materially above target and prompt aggressive Fed action. “The assumption of rapid Fed rate hikes is ultimately based on the assumption that U.S. inflation will not only pick up in the short term due to (partly Corona-related) special effects, but will sustainably firm up to levels above the Fed target. We do not share this view of the market,” Commerzbank added.

The dollar made a poor start to the week, compounding its losses from last week, following a slip in U.S. bond yields.

U.S. bond yields gave up some of their gains Monday, with the 10-year Treasury yields at 1.59%, down from 1.61% at the highs of the day.

Still, the latest positioning data showed bullish bets on the greenback hit their highest level for the year so far.

Net longs speculative bets on the dollar were at the highest level year-to-date, according to a CFTC positioning report for the week ended on April 13.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





Source link